(Ignore income taxes in this problem. ) Dowlen, Inc. , is considering the purcha

Question

(Ignore income taxes in this problem. ) Dowlen, Inc. , is considering the purchase of a machine that would cost $150,000 and would last for 6 years. At the end of 6 years, the machine would have a salvage value of $23,000. The machine would reduce labor and other costs by $36,000 per year. Additional working capital of $6,000 would be needed immediately. All of this working capital would be recovered at the end of the life of the machine. The company requires a minimum pretax return of 12% on all investment projects. The net present value of the proposed project is closest to: $13,223 $9,657 $6,699 -$2,004 Depreciation is included as a cash flow in capital budgeting decisions to ensure that the original cost of the asset is fully recovered. True False

Explanation / Answer

c F

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